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Money Laundering in Korea: Understanding the Risks and Regulations
In recent years, South Korea has taken significant steps to combat money laundering and terrorist financing within its borders. As part of this effort, the country has established a comprehensive Anti-Money Laundering (AML) framework that encompasses legal and institutional tools to detect and prevent domestic and international illegal money laundering.
What is Money Laundering?
Money laundering refers to the process of disguising the illicit origin of funds to make them appear legitimate. In Korea, money laundering is defined as “criminal acts of disguising the fact of acquisition and disposal of assets or concealing such assets, or disguising and concealing for the purpose of evading taxes.”
Korea Financial Intelligence Unit (KoFIU)
The KoFIU was established in 2001 to collect and analyze Suspicious Transaction Reports (STRs) from financial institutions. The unit works as an institutional link between financial institutions and law enforcement agencies, receiving STRs, analyzing them, and disseminating the information to investigative agencies for further action.
AML/CFT Legislation in Korea
Four major AML/CFT legislation in Korea include:
- Financial Transaction Reports Act (FTRA)
- Act on Special Cases Concerning the Prevention of Illegal Trafficking in Narcotics
- Act on Regulation and Punishment of Criminal Proceeds Concealment
- Act on Prohibition against the Financing of Terrorism and Proliferation of Weapons of Mass Destruction
The FTRA serves as a legal ground for adopting STR, where transactions suspected to be involved in money laundering and tax evasion have to be reported to the head of FIU by financial institutions.
Financial Institutions’ Reporting Obligations
Financial institutions are required to report suspicious transactions to the KoFIU. The reporting obligations include:
- Suspicious Transaction Reports (STRs)
- Currency Transaction Reports (CTRs)
Reporting entities, such as financial institutions, file STRs and CTRs to the KoFIU through an internal reporting system and Customer Due Diligence (CDD) implementation.
Law Enforcement Agencies’ Response
Law enforcement agencies use financial transaction data received from the KoFIU to respond with feedback on what was received. The agencies apply sanctions to severe criminals and money laundering offenders under the AML/CFT regime.
International Cooperation
The KoFIU operates relevant international cooperation, such as information exchange with foreign FIUs. The unit has set up a system to coordinate with domestic agencies and provides consistent training to financial institutions.
Conclusion
In conclusion, Korea’s AML framework is designed to prevent money laundering activity through financial institutions and protect the nation from the proliferation of anti-social serious crimes.